Logistics

Demurrage & Detention costs and how to avoid them!

If you are involved in running a business reliant on imported goods, there are certainly added costs that you must be aware of, namely demurrage and detention costs. Although funny to say out loud, these costs are as serious as a heart attack and can cause significant losses to your eCommerce business.

When you import goods, they first arrive at your local port in a container. These ports allow you to store your products at the port for a limited time at the port free of cost which is also known as “free time”. The free time usually varies between 3-5 days and is provided to all importers so that they may arrange all the logistics and paperwork involved for customs and transportation. After the allocated free time, charges such as demurrage and detention come into play.

Demurrage Cost

Demurrage is the storage cost of your products at the port after the free time has expired. This is a daily rate tied to the size of your container, and increases over time, hence it is crucial for any business owner to avoid racking up huge demurrage costs and get their goods out of the port in a timely manner.  Demurrage is a graduated charge and the daily rate increases as time progresses. Some port authorities charge as much as USD 200/day for the 1st day of demurrage for a 40-foot container and that rate only increases as time progresses, which can be detrimental to your profitability.

Detention Cost

Detention is a similar extra charge, but one that is added by the material lenders and transportation providers whose resources and equipment you require to move your products from the port to your storage units. The goods arrive at the port in a container which needs to be returned back to the shipping company in a stipulated time. The goods also need to be loaded with equipment into trucks or other transport vehicles and then again unloaded in your warehouse. The container, truck and its driver, the forklift and its operator and any and all other equipment required to move the products come with a cost, and any delays causing the equipment to be used over the initially stipulated time add an extra charge known as detention.

In today’s competitive business environment, every business strives to decrease costs wherever possible, but what’s even more crucial is to not add avoidable heavy charges because of operational inefficiencies. As a small business owner, you should allocate time and focus on planning and time management whenever importing goods, to ensure your products move from the port to your storage unit in an efficient and scheduled manner.

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